ACRU Senior Fellow Ken Blackwell wrote this column appearing July 13, 2010, on HuffingtonPost.com.
My friend Matt Lewis recently authored a thoughtful column about General Motors. As he pointed out, regardless of how one feels about the government bailout of GM — which he and I both vigorously opposed — there is reason for optimism about the company’s future.
To be sure, there is an argument to be made for conservatives to actually root for GM’s continued failure. Presumably, this would lessen the odds that the government would attempt such a heavy-handed maneuver in the future.
But as a former Cincinnati Mayor — and Treasurer of State of Ohio (another state struggling to adapt from a manufacturing economy to an information economy) — my strong philosophical opposition to bailouts is tempered by my realization that the decision was made, and now we must move forward.
It’s also important for someone to make this point before it’s too late — if GM does succeed at turning things around, it should not be construed as “proof” the bailout “worked,” nor should President Obama attempt some sort of victory tour to score political points. For one thing, it’s impossible to say that bailing out GM — even if GM turns things around — was good. It very well may be that allowing GM to fail would have forced the industry to modernize, and would have allowed competitors like Ford to gain market share. We can have that debate, but that’s water under the bridge now.
It’s too early to predict how things will play out (I’ll be more charitable toward GM once the taxpayers are fully compensated, and once the government no longer owns stock in the company), but evidence suggests the new GM regime is miraculously attempting to implement conservative free market principles. Should GM succeed in achieving long-term profitability, the credit will belong to the new leadership, not the federal government.
Based on early reports, it seems the old days of GM producing cars that no one really wanted and then offering steep discounts just to move subpar products, are over. Also gone are the days when GM was in a variety of businesses that were unrelated to the automobile industry. Now the company concentrates solely on producing high quality cars, trucks and SUVs, nothing else. I’m told that within GM there is a deep desire to pay back the government loan and turn the company around to permanent profitability. Again, I will believe it when I see it, but, so far, indications are positive that GM will do just that.
It’s also worth noting that General Motors’ June U.S. sales rose 11 percent from the same month last year. Sales of GM’s Camaro, Malibu, and its family SUV, the Equinox, are flourishing The Camaro outsold Ford’s Mustang for 11 straight months until Ford was forced to offer big incentives to lure buyers.
Ten GM models ranked in the Top 3 of their segment, more than any other manufacturer and GM now boasts four award winning models; Tahoe; Avalanche; Sierra LD and the Escalade. Motor Trend recently reported, “Buick Is Back,” and featured a story applauding the brand’s quality and performance.
In addition, the company has completely restructured its labor agreement to bring its labor costs in line with what Toyota is paying. The company has inked a new contract with labor that includes a “no-strike” provision that extends beyond five years. GM also now has more flexibility to bring on temporary skilled and non-skilled workers to keep plants open and production lines running.
Within a few months, I am sure we will see a high profile victory tour by members of the Obama Administration who will want to claim a lion’s share of the credit for GM’s turnaround. But make no mistake about it, if GM turns the corner, it will be the result of new leadership by a determined CEO who is demanding a strong work ethic and utilizing sound free market principles to return General Motors to icon status within the automobile industry.